Corporate Finances

Investor A owns $1,000 worth of stock that does not pay a dividend. Investor B owns $1,000 of an equivalent stock that, after paying a dividend, becomes an investment in stock and cash: $900 in stock and $100 in dividend income. If the capital gains tax is lower than the tax on dividends, which investor has the better position: Investor A selling 10% of the stock to make an equivalent homemade dividend, or Investor B?

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First work out the calculations. I assume a 35% regular tax bracket and 15% capital gains tax.

Investor A sells 10% of the stock to get a $100 gain. The gain in taxed at 15%, thus $15. The net cash in ...

Solution Summary

Investor A owns $1,000 worth of stock that does not pay a dividend. Investor B owns $1,000 of an equivalent stock that, after paying a dividend, becomes an investment in stock and cash: $900 in stock and $100 in dividend income. If the capital gains tax is lower than the tax on dividends, which investor has the better position: Investor A selling 10% of the stock to make an equivalent homemade dividend, or Investor B?

Khandker Motors finances 40% of its total capital with debt. The cost of debt is 11%. The firm is in the 37% tax bracket and earned an operating profit of $2.5 million dollars. If the Khandker's total capital amounts to $22 million and its book value per share is $20, what is the firm's earnings per share?
a.
$0.85

Southwest Physicians, a medical group practice, is just being formed. It will need $2 million of total
assets to generate $3 million in revenues. Furthermore, the group expects to have a profit margin of 5
percent. The group is considering two financing alternatives. First, it can use all-equity financing by
requiring each

Research a company that has been involved in a corporate financial scandal
1. Identify the company and the ethical dilemma.
2. Analyze the key elements in the situation:
a. Who benefited or was harmed? How did they benefit? How were they harmed?
b. What rights or claims were violated?
c. What specific in

Samuelson's article identifies the American public as being "conspicuously complicit" in the ever-increasing budget deficit because "we're focused on our own entitlements."
Does this concept carry over to corporate culture? What priorities should a CEO have in terms of providing for his or her employees while also properly ma